Why advisers can't just "follow the news" when deciding on structure
As interest rates continue their downward shift, New Zealand’s housing market has shown fresh signs of activity. According to CoreLogic data, national home values have now lifted for six consecutive months, and both listings and buyer sentiment are on the rise.
For many homeowners this is cause for celebration, and for homebuyers, lower rates are always good news. However, mortgage advisers still urge caution – not because the momentum isn’t real, but because the broader economic backdrop is telling a more complex story.
“Looking at the market conditions, there is more excitement in the air – but it doesn’t necessarily mean house prices are skyrocketing,” Twine Mortgage Advisers director Eugene Bartsaikin said. “Interest rates are falling for a reason, and that's because the economy is not doing so well.”
That disconnect between falling rates and growing hardship is something Bartsaikin is increasingly seeing firsthand. Clients coming up for renewal aren’t always calling with good news. Some are calling after job losses, others with real concerns about affordability.
“It’s not uncommon to pick up the phone for a renewal and have a client tell you they’ve just been made redundant, and we want to be able to respond with empathy and understanding,” Bartsaikin said.
“This also means that when we’re choosing a lender, interest rates are one of the last things we’ll think about. It’s a great starting point, but you also have to plan ahead.”
A more risk-aware borrower mindset
This shift in focus is also being reflected in borrower behaviour. New Zealand’s short-term home loans are increasingly dominating the market, with many borrowers opting for floating, six-month or one-year fixed rates.
While that mirrors the broader narrative around interest rate cuts, the adviser role is now less about following the short-term news cycle.
“The main emphasis is on the product and how the client uses it, particularly when there’s contingency or emergency planning involved,” Bartsaikin said.
“That’s a major part of preparing for these inevitable what-ifs, and that’s a big part of an adviser’s job. There’s a trend of advisers embracing this, and that’s why our sector has grown.”
Bartsaikin noted that the boom-bust cycle of interest rates should always be in the background when making decisions on structure. With this in mind, the key is not to try and predict where rates will go, but rather to ensure that clients are making fully informed decisions regarding their risk levels.
He said that this is an area where advisers will need to be particularly careful over the coming year, as the low short-term rates will inevitably look very attractive to clients – but as has been demonstrated repeatedly, the world can turn on a dime.
“For advisers, we can’t just follow those short-term trends,” Bartsaikin said. “We need to equip our clients with the various ways to manage the interest rate risk so that they can make an informed choice.
“Rates can start falling rapidly, and then start rising rapidly. Our job is to apply what’s going on to narrow down the client selection of interest rate choices. If the client makes that informed decision, it never comes back on you.”
When it comes to the lenders, Bartsaikin noted that turnaround times are still a persistent challenge across the industry. He encouraged lenders to embrace the adviser channel, particularly in uncertain times where good advice can make all the difference.
“We know some banks advertise faster turnaround times if you go to them directly,” he said. “I would encourage banks to embrace the third party channel as much as possible, and they’ll see a lot of growth from that.”
